The AICD has made significant advances on its top-level regulatory priorities this year. Director IDs and financial services governance are also in focus.
Each year, the AICD sets priorities for our work on regulatory and policy issues. These help guide our advocacy and engagement with government. Of course, we also remain flexible to respond to both market and policy developments in the governance space as they arise. The AICD has contributed to important regulatory outcomes over FY24, with key updates below.
Priority 1: Targeted cyber policies that lift national resilience
The AICD continues to have a strong focus on cyber governance and has been an active contributor to the development of Australia’s new national cybersecurity strategy. We were pleased to see many of the issues we championed — more coordination within government, a “team Australia” focus to build resilience, and no mandating of extra cyber duties on directors (recognising existing legal obligations) — all reflected in the strategy.
We continue to build member resources, issuing a new director resource, Governing through a Cyber Crisis with the Cyber Security Cooperative Research Centre and Ashurst. This complements our 2023 Cyber Governance Principles, cyber courses and webinars.
Priority 2: Balanced policy settings that support high-quality disclosure and practice
Climate reporting — and the expectations and liability settings to support it — have been a dominant focus for the AICD over the financial year. We support Australia building a high-quality, internationally aligned climate reporting framework. But our reporting framework also requires supporting liability adjustments and frameworks, given the complex and scenario-based nature of climate disclosures.
AICD advocacy, with that of other stakeholders, has seen the legislation introduced into parliament provide for a qualified director sign-off on compliance with the new standards, and a three- year period of regulator-only enforcement for the most complex disclosures. At the time of writing, the bill is before the parliament for consideration.
We are also providing significant resources to support members, with a new Director Guide to Mandatory Climate Reporting, developed with MinterEllison and Deloitte, recording over 20,000 downloads since its release in late 2023. This and more resources are available through the Climate Governance Initiative website.
Members can also access the AICD’s free climate e-learning modules and our new Climate Governance for Australian Directors short course, as part of building skills and capacity. The AICD also participated in the statutory review of the important 2021 continuous disclosure law reforms, with the tabling of the government’s review in May.
Priority 3: NFP regulation that promotes financial sustainability
Targeted and proportionate regulation and board obligations appropriate to the NFP sector are important messages that we reinforce with policymakers. Priorities in FY24 have included climate reporting, where the AICD continues to argue that the case for NFPs being captured in the new regime is unclear. We contend that NFPs, like charities, should be excluded or subject to simpler reporting requirements.
We have also continued to argue against disproportionate director liability proposals, including criminal sanctions, being proposed in aged care reforms. We have commissioned expert legal advice to support our case with government.
NFP fundraising reform remains a focus, although progress remains slow at state level.
The AICD has launched a major refresh of our NFP Governance Principles.
Priority 4: Coordinated and proportionate regulation
The complex range of issues facing boards can feel overwhelming, and better coordination and targeting of significant changes is required. The government has committed to introducing a UK- style “regulatory grid” for financial services — something advocated for by industry groups in banking and strongly supported by the AICD..
Canberra delegation
Through our Policy Leadership and Public Affairs work, the AICD contributes to policy development and debate with government, stakeholders and media. As part of this focus, in early July, AICD CEO Mark Rigotti will again lead a delegation of senior directors in discussions with federal parliamentarians and senior public servants. The delegation includes senior AICD members with governance roles across many sectors of the economy. The delegation is an important component of our government relations program and an opportunity to bring director perspectives to key decision-makers. We will also be discussing the AICD’s public policy and regulatory priorities.
Director ID breaches
Last month two Western Australian directors were convicted ex-parte for failing to have director IDs. Perth Magistrates Court imposed fines of $5000 in each case. The directors had until the end of May to apply to have their convictions set aside.
This follows ASIC’s earlier prosecution in March in Sydney (subsequently discontinued) and highlights the regulator’s focus on director IDs. Director IDs are a legal requirement. Fines of up to $18,780 (60 penalty units) and criminal penalties can apply. For more details on obtaining a Director ID, go to: bit.ly/DirectorIDInfo
Financial services governance
Australia’s financial services sector now has a new accountability framework under the Financial Accountability Regime (FAR). FAR commenced for authorised deposit-taking institutions from March this year, and will expand to insurance and superannuation in 2025. Replacing the Bank Executive Accountability Regime, FAR is the final significant tranche of law reform from the financial services Royal Commission.
Under the regime, all directors and senior executives of financial services entities are “accountable persons” subject to individual obligations. While there are no direct personal civil liability provisions, accountable persons can be disqualified for FAR breaches. Other elements include deferred remuneration obligations on variable pay for accountable persons, and civil penalties for entities incurring breaches.
Across many sectors, government and regulators are favouring heightened due diligence and accountability obligations on directors and management that have parallels to FAR. The aged care proposals, while extending further than FAR, are an example.
The Australian Prudential Regulation Authority will soon review its governance prudential requirements on directors of financial services entities. These requirements can ultimately filter through to broader governance expectations and often set a precedent for regulatory reform in other industries. The AICD will engage closely.
This article first appeared under the headline 'Making Progress’ in the June 2024 issue of Company Director magazine.
Practice resources — supporting good governance
Examples of the AICD’s contemporary governance practice resources for members:
Cyber Security Governance Principes
- Developed by the AICD and the Cyber Security Cooperative Research Centre, these practical principles guide boards on good cyber practice, including key questions and governance red flags.
Effective Board Minutes
- The AICD’s joint statement and practice guide, prepared with the Governance Institute, provide Australia’s leading guidance on best practice and key considerations in board minutes.
Ethics in the Boardroom
- Developed with the Ethics Centre, this guide provides a framework for boards on ethical decision-making.
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